VIRTUAL FINANCIAL ASSETS ACT

CHAPTER 590

VIRTUAL FINANCIAL ASSETS ACT

AN ACT to regulate the field of Initial Virtual Financial Asset Offerings

and Virtual Financial Assets and to make provision for matters ancillary or

incidental thereto or connected therewith.

1st November, 2018

ACT XXX of 2018. as amended by Legal Notice 106 of 2021 and Acts

XLVI of 2021 , XIV and XXXVI of 2024 and XI of 2025.

The short title of this Act is the Virtual Financial Assets

Act.

(Article 2)

Matters to be specified in a whitepaper of an issuer and requirements

for its approval and publication

General principles

1. The whitepaper shall contain the information which,

according to the particular nature of the issuer and of the virtual

financial assets offered to the public, is necessary to enable investors

to make an informed assessment of the prospects of the issuer, the

proposed project and of the features of the virtual financial asset.

This information shall be presented in an easily analysable and

comprehensible form.

2. Certain information specified in this Schedule may be

omitted from the whitepaper if

(a)

disclosure of such information would be

contrary to the public interest;

(b)

disclosure of such information would be

seriously detrimental to the issuer, provided that the omission

would not be likely to mislead the public with regard to facts

and circumstances essential for an informed assessment of the

prospects of the issuer, the proposed project and of the features

of the virtual financial assets to which the whitepaper relates;

(c)

such information is of minor importance only for

a specific offer and is not information that will influence an

informed assessment of the prospects of the issuer, the

proposed project and of the features of the virtual financial

assets to which the whitepaper relates; or

(d)

disclosure of such information is found to be

inappropriate to the issuer’s sphere of activity or proposed

activity, as the case may be, or its legal form or to the virtual

financial assets being offered, in which case the whitepaper

shall contain equivalent information when available.

3. The whitepaper shall be drafted in the English language

and any or no additional languages, at the issuer’s discretion.

Summary

4. (1)

The whitepaper shall include a summary. The

summary shall, in brief and non-technical language, provide key

information in relation to the offering. The format and content of the

summary of the whitepaper shall provide, in conjunction with the

whitepaper, appropriate information about essential elements of the

virtual financial assets concerned in order to aid investors when

considering whether to invest in such virtual financial assets. The

summary shall be drawn up in a common format in order to facilitate

comparability of the summaries of similar virtual financial assets and

its content should convey the key information of the virtual financial

assets concerned in order to aid investors when considering whether

to invest in such virtual financial assets. The summary shall also

include a warning that

(a)

it should be read as an introduction to the

whitepaper;

(b)

any decision to invest in the virtual financial

assets should be based on consideration of the whitepaper as a

whole by the investor;

(c)

the offering of virtual financial assets does not

constitute an offer or solicitation to sell financial instruments

and that any such offer or solicitation of financial instruments

will be made only by means of a prospectus or other offering

documentation in terms of any applicable Maltese law;

(d)

without prejudice to article 10 of this Act, civil

liability attaches to those persons who have tabled the

summary including any translation thereof, and applied for its

notification.

(2) For the purposes of this paragraph "key information"

means essential and appropriately structured information which is to

be provided to investors with a view to enabling them to understand

the nature and the risks of the proposed project, the issuer and the

virtual financial assets that are being offered to them.

Specific matters to be included

5. Paragraphs 6 to 13 of this Schedule contain the specific

matters to be included in a whitepaper.

The persons responsible for the whitepaper

6. Names, functions and declarations by the persons

responsible for the whitepaper that to the best of their knowledge the

information contained in the whitepaper is in accordance with the

facts and that the whitepaper makes no omission likely to affect its

import.

The offer to the public

7. At least, and to the extent it is applicable, the following

information on the offer shall be provided in the whitepaper

(a)

description of the reason behind the initial

virtual financial asset offering;

(b)

detailed technical description of the protocol,

platform and, or application, as the case may be, and the

associated benefits;

(c)

detailed description of the sustainability and

scalability of the proposed project;

(d)

associated challenges and risks as well as

mitigating measures thereof;

(e)

detailed description of the characteristics and

functionality of the virtual financial assets being offered;

(f)

detailed description of the issuer, development

team, advisors and any other service providers that may be

deployed for the realisation of the project;

(g)

detailed description of the issuer’s wallet/s used;

(h)

description of the security safeguards against

cyber threats to the underlying protocol, to any off-chain

activities and to any wallets used by the issuer;

(i)

detailed description of the life cycle of the initial

virtual financial asset offering and the proposed project;

(j)

detailed description of the past and future

milestones and project financing;

(k)

detailed description of the targeted investor base;

(l)

exchange rate of the virtual financial assets;

(m)

description of the underlying

protocol’s

interoperability with other protocols;

(n)

description of the manner funds raised through

the initial virtual financial asset offering will be allocated;

(o)

the amount and purpose of the issue;

(p)

the total number of virtual financial assets to be

issued and their features;

(q)

the distribution of virtual financial assets;

(r)

the consensus algorithm, where applicable;

(s)

incentive mechanism to secure any transactions,

transaction and/or any other applicable fees;

VIRTUAL FINANCIAL ASSETS

(t)

in the case of a new protocol, the estimated

speed of transactions;

(u)

any applicable taxes;

(v)

any set soft cap and hard cap for the offering;

(w)

the period during which the offer is open;

(x)

any person underwriting or guaranteeing the

offer;

(y)

any restrictions on the free transferability of the

virtual financial assets being offered and the DLT exchange/s

on which they may be traded, to the extent known by the

issuer;

(z)

methods of payment;

(aa)

specific notice that investors participating in the

initial virtual financial asset offering will be able to get their

contribution back if the soft cap is not reached at the end of the

offering and detailed description of the refund mechanism,

including the expected time-line of when such refund will be

completed;

(ab)

detailed description of the risks associated with

the virtual financial assets and the investment therein;

(ac)

the procedure for the exercise of any right of

pre-emption;

(ad)

detailed description of the smart contract/s, if

any, deployed including inter alia the adopted standards, its/

their underlying protocol/s, functionality/-ies and associated

operational costs;

(ae)

if any smart contract/s is/are deployed by the

issuer, details of the auditor who performed an audit on it/

them;

(af)

description of any restrictions embedded in the

smart contract/s deployed, if any, including inter alia any

investment and/or geographical restrictions;

(ag)

the programme agents used to obtain data and

verify occurrences from smart contracts (also known as

‘oracles’) used and detailed description of their characteristics

and functionality thereof;

(ah)

bonuses applicable to early investors including

inter alia discounted purchase price for virtual financial assets;

(ai)

the period during which voluntary withdrawals

are permitted by the smart contract, if any;

(aj)

description of the issuer’s adopted white-listing

and anti-money laundering and counter financing of terrorism

procedures in terms of the Prevention of Money Laundering

Act and any regulations made and rules issued thereunder;

(ak)

intellectual property rights associated with the

offering and protection thereof; and

(al)

the methods of and time-limits for delivery of

the virtual financial assets

Provided that the competent authority shall have the

power to waive or modify any of the above requirements within the

context of a particular initial VFA offering or a particular application

for admission to trading on a DLT exchange, as the case may be.

Details of the issuer

8. The following details of the issuer

-

Name;

-

Registered address and registration number;

-

Date of registration;

-

The issuer’s object(s);

-

Where applicable, the group of undertakings to

which the issuer belongs;

-

In so far as they are known, indication of the

members who directly or indirectly exercise or could exercise

a determining role in the issuer’s administration.

The issuer’s principal activities

9. Description of the issuer’s principal activities including

the disclosure of any legal proceedings having an important effect on

the issuer’s financial position.

The issuer’s board of administration

10. Names, addresses and functions of administrators.

Benefits for third parties and other expenditure

11. The amount or estimated amount of preliminary

expenses and the persons by whom any of those expenses have been

paid or are payable, and the amount or estimated amount of the

expenses of the issue and the persons by whom any of those expenses

have been paid or are payable, in whatever form.

Issuer’s financial track record

12. Where the issuer has been established for a period

exceeding three years, details of its financial track record.

Validity of a whitepaper, arrangements for approval and

publication of a whitepaper.

13. A whitepaper shall be valid for 6 months after its

approval by the competent authority for offers to the public.

14. (1)

The competent authority shall not register a

whitepaper unless it is satisfied that the whitepaper has been drawn

up in accordance with the provisions of this Act, this Schedule and

any regulations, rules or guidance made or issued thereunder.

(2) The competent authority shall notify the issuer as the

case may be, of its decision regarding the approval or otherwise of

the whitepaper.

Significant new factors, material mistakes or inaccuracies

15. (1)

Every significant new factor, material mistake or

inaccuracy relating to the information included in the whitepaper

which is capable of affecting the assessment of the virtual financial

assets and which arises or is noted between the time when the

whitepaper is approved and the final closing of the offer to the public,

whichever occurs later, shall be mentioned in a supplement appended

to the whitepaper. Such a supplement shall be approved in the same

way and published in accordance with at least the same arrangements

as were applied when the original whitepaper was published. The

summary, and any translations thereof, shall also be supplemented, if

necessary, to take into account the new information included in the

supplement.

(2) Investors who have already agreed to purchase or

subscribe for the virtual financial assets before the supplement is

published shall have the right to withdraw their acceptance within

two working days after the publication of the supplement, provided

that the new factor, mistake or inaccuracy referred to in paragraph (1)

arose before the final closing of the offer to the public and the

delivery of the virtual financial assets. That period may be extended

by the issuer in which case the smart contract, if any, shall be updated

accordingly. The final date of the right of withdrawal shall be stated

in the supplement.

(1)

Unless the context otherwise requires, terms and

phrases not defined in this Act shall have the same meaning as the

said terms and phrases are given in the Malta Digital Innovation

Authority Act.

(2) In this Act and in the Schedules thereto, unless the

context otherwise requires -

"administrator" means an officer or any person who is

appointed to carry out representative and fiduciary functions in the

control and administration of a legal person, and any person who

carries out such functions even if under another name, but shall not

include a technical administrator or a resident agent under the

Innovative Technology Arrangements and Services Act, and the term

"board of administration" shall be construed accordingly;

"advertisement" means any form or medium of marketing

activity disseminated to the public by means of any type of media,

which promotes the purchase of a virtual financial asset or the

procurement of a VFA service

Provided that an advertisement shall not include the

provision of a personal recommendation;

"asset-referenced token" shall have the same meaning as that

assigned to it in point (6) of Article 3(1) of the MiCA Regulation;

"assets" means movable and immovable property of any kind;

"benchmark" means any rate, index or figure, made available

to the public or published that is periodically or regularly determined

by the application of a formula to, or on the basis of, the value of one

or more underlying assets or prices, including estimated prices, actual

or estimated interest rates or other values, or surveys, and by

reference to which the amount payable under a virtual financial asset

or the value of a virtual financial asset is determined;

"beneficial owner" shall have the same meaning assigned to it

under regulation 2 of the Prevention of Money Laundering and

Funding of Terrorism Regulations, and "beneficial ownership" shall

be construed accordingly;

"Central Bank" means the Central Bank of Malta as defined by

the Central Bank of Malta Act;

"company" means a limited liability company constituted in

Malta in accordance with the Companies Act or any law which may

from time to time be in force, or a company incorporated outside

Malta, provided that such company if not incorporated in Malta

would qualify to be so incorporated under the laws of Malta;

"competent authority" means the Malta Financial Services

Authority established by the Malta Financial Services Authority Act;

"court" means the Civil Court, First Hall;

"decision" includes any directive, determination, direction,

condition, measure, requirement or specification, howsoever

described, made by the competent authority;

"Directive 2015/849/EU" means Directive 2015/849/EU of the

European Parliament and of the Council of 20 May 2015 on the

prevention of the use of the financial system for the purposes of

money laundering or terrorist financing, amending Regulation (EU)

No 648/2012 of the European Parliament and of the Council, and

repealing Directive 2005/60/EC of the European Parliament and of

the Council and Commission Directive 2006/70/EC, as may be

amended from time to time;

"Distributed Ledger Technology" or "DLT" means a database

system in which information is recorded, consensually shared, and

synchronised across a network of multiple nodes as further described

in the First Schedule of the Innovative Technology Arrangements and

Services Act, whether the same is certified under that Act or

otherwise;

"DLT asset" means -

(a)

a virtual token;

(b)

a virtual financial asset;

(c)

electronic money;

(d)

electronic money token; or

(e)

a financial instrument,

that is intrinsically dependent on, or utilises, Distributed Ledger

Technology;

"DLT exchange" means any trading and, or exchange platform

or facility, whether in Malta or in another jurisdiction, on which any

form of DLT asset may be transacted in accordance with the rules of

the platform or facility;

"document" or "documentation" includes information recorded

in any form and, in relation to information recorded otherwise than in

humanly intelligible form, references to its production include

references to producing a copy of the information in legible form;

"EBA" means the European Banking Authority established by

Regulation (EU) No 1093/2010;

"EEA State" means a State which is a contracting party to the

agreement on the European Economic Area signed in Porto on 2 May

1992 as amended by the Protocol signed at Brussels on 17 March

1993, and as amended by any subsequent acts;

"EIOPA" means the European Insurance and Occupational

Pensions Authority established in terms of Article 1 of Regulation

(EU) No 1094/2010;

"electronic money" shall have the same meaning assigned to it

under the Third Schedule to the Financial Institutions Act;

"electronic money token" or "e-money token" shall have the

same meaning as that assigned to it in point (7) of Article 3(1) of the

MiCA Regulation;

"ESMA" means the European Securities and Markets

Authority established by Regulation (EU) No 1095/2010 of the

European Parliament and of the Council of 24 November 2010;

"ESRB" means the European Systemic Risk Board established

by Regulation (EU) No 1092/2010 of the European Parliament and of

the Council of 24 November 2010, on European Union macro-

prudential oversight of the financial system and establishing a

European Systemic Risk Board;

"European regulatory authority" means an authority in a

Member State or EEA State, other than Malta, which exercises any

regulatory or supervisory function in relation to financial services

corresponding to a function of the competent authority as defined in

the Malta Financial Services Authority Act;

"European right" means the entitlement of a licence holder to

establish a branch or provide services in a Member State or an EEA

State, other than Malta -

(a)

in accordance with the Treaty on the Functioning

of the European Union as applied in that Member State or EEA

State; and

(b)

subject to any regulations made under this Act,

or rules issued by the competent authority pursuant to this Act;

"European Supervisory Authorities" or "ESAs" means EBA,

ESMA and EIOPA;

"financial instrument" shall have the same meaning assigned to

it under the Second Schedule to the Investment Services Act, whether

or not issued in Malta;

"funds" means banknotes and coins, scriptural money,

electronic money and virtual financial assets;

"initial virtual financial asset offering" or "initial VFA

offering" means a method of raising funds whereby an issuer is

issuing virtual financial assets and is offering them in exchange for

funds;

"inspector" means an inspector appointed under article 40;

"issuer" means a legal person duly formed under any law for

the time being in force in Malta which issues or proposes to issue

virtual financial assets in or from within Malta;

"licence" means a licence to provide a VFA service or services

granted by the competent authority in terms of article 15;

"licence holder" means a person who holds a licence under this

Act;

"Malta’s international commitments" means Malta’s

commitments, responsibilities and obligations arising out of

membership of, or affiliation to, or relationship with, any

international, global or regional organisations or grouping of

countries or out of any treaty, convention or other international

agreement, however called, whether bilateral or multilateral, to which

Malta is a party;

"market abuse" means insider dealing, the unlawful disclosure

of inside information and market manipulation in relation to any

transaction, order or behaviour concerning any virtual financial asset;

"Member State" means a Member State of the European

Union;

"MiCA Regulation” means Regulation (EU) 2023/1114 of the

European Parliament and of the Council of 31 May 2023 on markets

in crypto-assets, and amending Regulations (EU) No. 1093/2010 and

(EU) No. 1095/2010 and Directives 2013/36/EU and (EU) 2019/

1937, as may be amended from time to time, and includes any

binding legal instruments, guidelines and other measures that have

been or may be issued thereunder;

"MiFID" means Directive 2014/65/EU of the European

Parliament and of the Council of 15 May 2014, on markets in

financial instruments and amending Directive 2002/92/EC and

Directive 2011/61/EU, as amended from time to time, and includes

any implementing measures that have been or may be issued

thereunder;

"Minister" means the Minister responsible for the regulation of

financial services;

"overseas regulatory authority" means an authority in a

country or territory outside Malta that is not a Member State or EEA

State which exercises any regulatory or supervisory function in

relation to financial services corresponding to a function of the

competent authority as defined in the Malta Financial Services

Authority Act;

"person" means a natural or legal person in terms of law;

"prescribed" means prescribed by regulations made under this

Act;

"qualifying holding" means a direct or indirect holding in a

legal person which represents ten per cent (10%) or more of the

capital or of the voting rights in such person which makes it possible

to exercise a significant influence on the administration of the person

in which that holding subsists and includes the holding of DLT assets

with voting, control or ownership rights, and "qualifying holder"

shall be construed accordingly;

"recognised jurisdiction" means a member of the European

Union or the EEA or the Organisation for Economic Co-operation

and Development as well as any other jurisdiction approved by notice

of the Minister from time to time for the purpose of this definition;

"resident in Malta" means an individual whose habitual

residence is in Malta;

"rules" refers to rules issued by the competent authority in

terms of this Act;

"smart contract" means a form of technology arrangement

consisting of -

(a)

a computer protocol; or

(b)

an agreement concluded wholly or partly in an

electronic form, which is automatable and enforceable by

computer code, although some parts may require human input

and control and which may be also enforceable by ordinary

legal methods or by a mixture of both;

"subject person" shall have the same meaning assigned to it

under regulation 2 of the Prevention of Money Laundering and

Funding of Terrorism Regulations;

"subsidiary" has the same meaning assigned to it under article

2 of the Companies Act;

"Tribunal" means the Financial Services Tribunal established

under article 21 of the Malta Financial Services Authority Act;

"unit" means any representation of the rights and interests in a

legal person and "unit holder" shall be construed accordingly;

"VFA agent" means any person who is registered as such with

the competent authority on the first date of the coming into force of

the Virtual Financial Assets (Amendment) Act, 2024;

2024. "VFA agreement" means any agreement the making or

performance of which, by either party, constitutes a service or

activity licensable under this Act;

"VFA exchange" means a DLT exchange for virtual financial

assets, operating in or from within Malta, within which multiple third

party buying and selling interests for virtual financial assets can

interact in a manner that results in a contract, by exchanging one

virtual financial asset for another or a virtual financial asset for fiat

currency that is legal tender or a fiat currency that is legal tender for a

virtual financial asset;

"VFA exchange operator" means a person or persons who

manages and, or operates the business of a VFA exchange and may be

the VFA exchange itself;

"VFA service" means any service falling within the Second

Schedule when provided in relation to a DLT asset which has been

determined to be a virtual financial asset;

"virtual financial asset" or "VFA" means any form of digital

medium recordation that is used as a digital medium of exchange,

unit of account, or store of value and that is not -

(a)

electronic money;

(b)

a financial instrument; or

(c)

a virtual token

Provided that, for the purposes of Part II, asset-referenced

tokens and e-money tokens shall also be excluded;

"virtual token" means a form of digital medium recordation

whose utility, value or application is restricted solely to the

acquisition of goods or services, either solely within the DLT

platform on or in relation to which it was issued or within a limited

network of DLT platforms

Provided that the term ''DLT platform'' referred to in this

definition shall exclude DLT exchanges

Provided further that a virtual token which is or may be

converted into another DLT asset type shall be treated as the DLT asset

type into which it is or may be converted;

"whitepaper" means a document in such form and containing

such information as specified in article 4 and the First Schedule.

(3) Any reference in this Act to any law, or provision

thereof, shall be construed as a reference to that law or provision as

from time to time in force, and shall include a reference to any

enactment replacing such law or provision, and to any subsidiary

legislation made thereunder.

(4)

In this Act and in any regulations made thereunder, if

there is any conflict between the English and Maltese text, the

English text shall prevail.

PART II

Initial VFA Offerings

(Article 2)

VFA services

1. Reception and Transmission of Orders

The reception from a person of an order to buy, sell or

subscribe for virtual financial assets and the transmission of that

order to a third party for execution.

2. Execution of orders on behalf of other persons

Acting to conclude agreements to buy, sell or subscribe for one

or more virtual financial assets on behalf of other persons.

3. Dealing on own account

Trading against proprietary capital resulting in conclusion of

transactions in one or more virtual financial assets.

4. Portfolio Management

Managing or agreeing to manage assets belonging to another

person if those assets consist of or include one or more virtual

financial assets or the arrangements for their management are such

that the person managing or agreeing to manage those assets has a

discretion to invest any of those assets in one or more virtual

financial assets

Provided that for the purposes of this paragraph, the term

"assets" shall exclude any financial instrument, and whether or not

issued in Malta.

5. Custodian or Nominee Services

(a)

Acting as custodian or nominee holder of a

virtual financial asset and, or private cryptographic key; or

(b)

holding a virtual financial asset and, or private

cryptographic key as nominee, where the person acting as

nominee is so doing on behalf of another person who is

providing any VFA service under this Schedule or on behalf of

a client of such person, and such nominee holding is carried

out in relation to such service.

6. Investment Advice

Giving, offering or agreeing to give, to persons in their

capacity as investors or potential investors or as agent for an investor

or potential investor, a personal recommendation in respect of one or

more transactions relating to one or more virtual financial assets.

For the purposes of this paragraph, a "personal

recommendation" shall mean a recommendation presented as suitable

for the person to whom it is addressed, or which is based on a

consideration of the circumstances of that person, and must constitute

a recommendation to take one of the following steps

(a)

to buy, sell, subscribe for, exchange, redeem or

hold a particular virtual financial asset;

(b)

to exercise or not to exercise any right conferred

by a particular virtual financial asset to buy, sell, subscribe for,

exchange, or redeem it.

A recommendation is not a personal recommendation if it is

issued exclusively through distribution channels or to the public.

7. Placing of virtual financial assets

The marketing of newly-issued virtual financial assets or of

virtual financial assets which are already in issue but not admitted to

trading on a DLT exchange, to specified persons and which does not

involve an offer to the public or to existing holders of the issuer’s

virtual financial assets.

8. The operation of a VFA exchange.

9. Transfer of virtual financial assets

Conducting a transaction on behalf of a third party that moves a

virtual financial asset from one virtual financial asset address or

account to another.

(1)

No issuer shall offer a virtual financial asset to

the public in or from within Malta or shall apply for a virtual

financial asset’s admission to trading on a DLT exchange unless such

issuer draws up a whitepaper which -

(a)

complies with the requirements of article 4; and

(b)

is registered in accordance with sub-article (2)

Provided that where a DLT asset is determined by the

issuer to be a financial instrument or electronic money, the issuer

shall be required to comply with the respective applicable laws in lieu

of the provisions of this Act.

(2) No whitepaper shall be issued or published in terms of

article 9(2) unless, ten working days before the date of its circulation in

any way whatsoever, a copy thereof, signed by every person named

therein as a member of the issuer’s board of administration or their

agent authorised in writing has been delivered to the competent

authority.

(3)

Repealed by Act XIV.2024.3.

(4) Upon being satisfied that the requirements of article 4(1)

have been complied with, the competent authority shall register the

whitepaper.

(5) Where the applicant is constituted in a recognised

jurisdiction, he shall abide with any local presence requirements as

may be prescribed or provided for in rules issued under this Act.

(1)

Every whitepaper shall -

(a)

be dated;

(b)

state the matters specified in the First Schedule;

and

(c)

include a statement by the board of

administration confirming that the whitepaper complies with

the requirements of article 3 and of this article.

(2) A condition requiring or binding an investor in an initial

VFA offering to waive compliance with any requirement of this

article or purporting to affect the investor with notice of any contract,

document or matter not specifically referred to in the whitepaper

shall be void.

Where the issuer maintains a website, its homepage shall

at least contain such information and in such format as may be

required by the competent authority by means of rules issued under

this Act.

(1)

Any type of advertisements relating to either an

initial VFA offering or the admission of a virtual financial asset to

trading on a VFA exchange shall satisfy the following requirements

(a)

advertisements shall be clearly identifiable as

such. The information contained in the advertisement shall not

be inaccurate or misleading. This information shall also be

consistent with the information contained in the whitepaper, if

already published in terms of article 9(2), or with the

information required to be in the whitepaper, if the whitepaper

is to be published afterwards;

(b)

an advertisement shall contain a statement that a

whitepaper has been or will be published in terms of article

9(2) and the addresses and times at which copies of the

whitepaper are or will be available to the public; and

(c)

all information concerning the initial VFA

offering or the admission to trading on a VFA exchange

disclosed in an oral or written form, even if not for advertising

purposes, shall be consistent with that contained in the

whitepaper

Provided that the term "information" shall be deemed for

the purposes of this article to include the name of any person

endorsing the issuer’s whitepaper

Provided further that where a person under this sub-article

is an issuer within the meaning of this Act, the reference to "VFA

exchange" shall be read as a reference to "DLT exchange".

(2) Such information shall be included in the whitepaper or

in a supplement thereto in accordance with the First Schedule.

The obligations of the issuer shall include

(a)

complying with the provisions of this Act and with

any regulations made and rules issued thereunder;

(b)

co-operating with the competent authority in an

open and honest manner;

(c)

providing prompt feedback to the competent

authority with respect to any enquiries raised by the

said competent authority;

(d)

disclosing to the competent authority in a timely

manner any material information of which it has

knowledge which addresses non-compliance, or

potential non-compliance with any of the

provisions of this Act or of any regulations made or

rules issued thereunder;

(e)

receiving and retaining all documentation and

information to demonstrate how, and to what

extent, it has satisfied the requirements as

prescribed in the provisions of this Act and of any

regulations made and rules issued thereunder, in so

far as they apply to any offer or admission to

trading referred to in article 3, including inter alia

how the issuer is considered to be a fit and proper

person to carry out the activity or activities referred

to in article 3, and to demonstrate how it has

complied and, as far as it can determine, how it

shall comply with its continuing obligations under

this Act;

(f)

submitting to the competent authority all required

information and documentation in terms of this Act

and of any regulations made and rules issued

thereunder, including the confirmations in terms of

article 4(1), in a timely manner;

(g)

disclosing to the competent authority without delay

any information or explanations that the competent

authority may reasonably require for the purpose of

verifying any information which should be taken

into account when considering an application for

the registration of a whitepaper;

(h)

submitting to the competent authority on an annual

basis a certificate of compliance within the

meaning of article 32; and

(i)

complying with any other conditions as the

competent authority may require or as may be

prescribed.Admission of virtual financial assets to

trading.

(1)

A person may apply for admission of its virtual

financial assets to trading on a VFA exchange in accordance with the

provisions of any regulations made or rules issued under this Act

Provided that where a person under this sub-article is an

issuer within the meaning found under this Act, the reference to

"VFA exchange" shall be read as a reference to "DLT exchange".

(2) Where, further to an application made under sub-article

(1), an issuer’s virtual financial assets are admitted to trading, the

issuer shall comply with all the applicable requirements as prescribed

in this Act and any regulations made and rules issued thereunder for

as long as such virtual financial assets remain admitted to trading

Provided that the provisions of article 3(1) and of this

sub-article shall not apply in so far as the said virtual financial assets

have been admitted to trading irrespective of the issuer’s will.

(1)

An issuer shall

(a)

conduct its business with honesty and integrity;

(b)

communicate with his investors in a fair, clear

and not misleading manner;

(c)

conduct its business with due skill, care and

diligence;

(d)

identify and manage any conflict of interest that

may arise;

(e)

have effective arrangements in place for the

protection of investors’ funds;

(f)

have effective administration arrangements;

(g)

maintain all of its systems and security access

protocols to appropriate international standards; and

(h)

be considered as a subject person.

(2) Where an issuer maintains a website in terms of article 5

and is required to make public any information or provide notice to

the public, the issuer shall be considered to have complied with this

obligation if it publishes such information or notice on his website.

(1)

The issuer shall be liable for damages sustained

by a person as a direct consequence of such person having bought

virtual financial assets, either as part of an initial VFA offering by

such issuer or on a DLT exchange, on the basis of information

contained in the whitepaper, website or advertisement by reason of

any untrue statement included therein

Provided that a statement included in a whitepaper,

website or advertisement shall be deemed to be untrue if it is

misleading or otherwise inaccurate or inconsistent, either wilfully or

in consequence of gross negligence, in the form and context in which

it is included

VIRTUAL FINANCIAL ASSETS

Provided further that a statement shall be deemed to be

included in a whitepaper if it is contained therein or in any document

or information referred to therein or issued therewith.

(2)

No person shall be liable under this article if -

(a)

he proves that he believed and had reasonable

grounds to believe, that the statement was true; or

(b)

on becoming aware of the untrue statement, he

immediately gave reasonable public notice in terms of article

9(2) of the untruthfulness of the statement.

(3) No person shall be liable for statements made in the

summary referred to in the First Schedule, including the translation

thereof, except when such statements are misleading, inaccurate or

inconsistent, when read together with the other parts of the

whitepaper, or if it does not provide, when read together with the

other parts of the whitepaper, key information in order to aid

investors when considering whether to invest in such virtual financial

assets. The summary shall contain a clear warning to that effect.

The offering of virtual financial assets, or the admission

to trading on a DLT exchange, in a country outside Malta shall be

subject to the laws of that country.

(1)

Without prejudice to any other powers of the

competent authority under other provisions of the Act, the competent

authority shall also have the power to

(a)

require the inclusion in the whitepaper,

advertisements or the issuer’s website, as applicable, of

supplementary information necessary for investor protection

as the competent authority may specify;

(b)

require the amendment in the whitepaper,

advertisements or the issuer’s website, as applicable, of any

information necessary for investor protection as the competent

authority may specify;

(c)

suspend an initial VFA offering or the trading on

a VFA exchange or prohibit or suspend advertisements if the

competent authority, in its reasonable discretion, believes or

suspects that a provision of this Act has been infringed;

(d)

prohibit an initial VFA offering or trading on a

VFA exchange if the provisions of this Act have been

infringed or if the competent authority, in its reasonable

discretion, believes or suspects that they have been or could be

infringed; and

(e)

make public the fact that an issuer is failing to

comply with his obligations under any provision of the Act

and may disclose measures or sanctions imposed on any

person responsible for the issue, circulation or distribution of a

whitepaper,

unless

such

disclosure

would

cause

disproportionate damage to the persons involved.

(2) Where a person under sub-article (1) is an issuer within

the meaning found under this Act, the reference to "VFA exchange"

shall be read as a reference to "DLT exchange".

PART III

Licensing Requirements

(1)

No person shall provide, or hold itself out as

providing, a VFA service in or from within Malta unless such person

is in possession of a valid licence granted under this Act by the

competent authority

Provided that, in so far as a determination has not

already been made in terms of article 3, a person under this sub-

article shall make a determination as to whether a DLT asset in

relation to which it provides, or holds itself out as providing, a VFA

service falls within the meaning of a virtual financial asset.

(2) The competent authority may by notice in writing to any

person determine that -

(a)

an activity constitutes a VFA service; or

(b)

a DLT asset qualifies as a virtual financial asset,

a virtual token, electronic money or a financial instrument, and

whether or not issued in Malta; or

(c)

a VFA service is provided in or from within

Malta; or

(d)

an initial VFA offering has been/is being made

in or from within Malta

Provided that the competent authority’s determination

shall be subject to any appeal in terms of article 51.

PART IV

Application, Grant, Cancellation etc. of Licences

(1)

An application for a licence under this Act shall

be made in the form and manner required by the competent authority

and shall furthermore -

(a)

contain or be accompanied by such information

VIRTUAL FINANCIAL ASSETS

and documentation, in addition to those required by this

article, as the competent authority may require or as may be

prescribed;

(b)

be verified in the manner and to the extent

required by the competent authority, or as may be prescribed;

(c)

contain the address in Malta for service on the

applicant of any notice or other document required or

authorised to be served on it by or under this Act;

(d)

be accompanied by a programme of operations

setting out the systems, security access protocols and any other

matters as may be required to be set out by the competent

authority from time to time; and

(e)

be accompanied by such fee as may be

prescribed in respect of the licence applied for, which fee shall

not be refundable.

(2) An application for a licence under this Act may only be

withdrawn by written notice to the competent authority at a time

before it has been granted or refused.

(1)

The competent authority may grant or refuse to

grant a licence applied for under this Act

Provided that the competent authority shall only grant a

licence upon being satisfied that the conditions laid down in this

article have been met and such licence may be general or may be

restricted to particular specified VFA services.

(2) The conditions referred to in sub-article (1) shall consist

of the following and shall be satisfied on an ongoing basis

(a)

the applicant is a fit and proper person to provide

the VFA services concerned and that the applicant will comply

with and observe the requirements of this Act and any

regulations made and rules issued thereunder and which are

applicable to it;

(b)

where the applicant is a natural person, such

person is resident in Malta;

(c)

where the applicant is a legal person

(i)

it is constituted either in Malta, in

accordance with the laws of Malta, or in a recognised

jurisdiction

Provided that where the applicant is

constituted in a recognised jurisdiction, it shall abide

with any local presence requirements prescribed or as

may be prescribed; and

(ii) its purposes or objects are limited to acting

as a licence holder and carrying on activities ancillary

or incidental thereto, and do not include purposes or

objects which are not compatible with the VFA

services of a licence holder.

For the purposes of this sub-paragraph, a

purpose or object referring to any activity that

requires any kind of authorisation whatsoever by the

competent authority under any Maltese law, other

than this Act, shall be deemed to be incompatible

with the VFA services of a licence holder

Provided that where a licence holder

proposes to engage in business activities which are

not listed in the Second Schedule and are not

compatible within the meaning of this sub-paragraph,

the licence holder shall be required to establish a

separate entity; and

(iii) its actual activities are compatible and

connected with the VFA services of a licence holder.

(3) (a)

In granting a licence the competent authority

may subject it to such conditions as it may deem appropriate and

having granted a licence it may, from time to time, vary or revoke any

condition so imposed or impose new conditions.

(b)

For the better carrying out of the provisions of

this Act, the competent authority may, from time to time, issue and

publish rules which shall be binding on licence holders and others as

may be specified therein. Such rules may lay down additional

requirements, conditions and, or exemptions in relation to activities

of licence holders and any other matters as the competent authority

may consider appropriate

Provided that different rules may be issued by the

competent authority with respect to different classes or categories of

applications.

(4) Without prejudice to the generality of sub-articles (1)

and (2), where a VFA exchange is managed or operated by a VFA

exchange operator other than the VFA exchange itself, the competent

authority shall establish by means of rules how the different

obligations are to be allocated between the VFA exchange and the

VFA exchange operator.

(5)

When considering whether to grant or refuse to grant a

licence the competent authority shall, in particular, have regard to -

(a)

the protection of investors and the general

public;

(b)

the protection of the reputation of Malta taking

into account Malta’s international commitments;

(c)

the promotion of innovation, competition and

choice; and

(d)

the reputation and suitability of the applicant and

all other parties connected with the applicant.

(6) Every licence shall specify the VFA service or services

which the holder thereof has been licensed to provide and shall state

the date on which it shall take effect.

(7) Without prejudice to the generality of sub-article (2), the

conditions to which the competent authority shall subject a licence

may be made applicable, or be prescribed to be applicable, to -

(a)

all licences;

(b)

certain categories of licences;

(c)

all licences granted to certain categories of

licence holders;

(d)

all licences in relation to particular VFA

services.

(8) Any requirement in this Act that a person be a fit and

proper person to carry out certain activities or functions shall be

interpreted as a requirement not only that such person be a fit and

proper person to carry out such activities or functions, but also that

any beneficial owner, qualifying holder, member of the board of

administration and any other person who will effectively direct the

business of the licence holder be a fit and proper person to carry out

such activities or functions.

(9) Where a licence holder proposes to engage in business

activities not listed in the Second Schedule but compatible within the

meaning of sub-article (2)(c)(ii), the competent authority may require

the establishment of a separate entity, where the proposed activities

may in the opinion of the competent authority impair or threaten to

impair either the financial soundness of the licence holder or the

ability of the competent authority to monitor the licence holder’s

compliance with all the obligations laid down in this Act or any

regulations and rules issued thereunder.

(1)

The competent authority shall establish a public

register of all licence holders. This register shall also indicate the

VFA services in relation to which each licence was issued.

(2) Such register shall be publicly available for

consultation, shall be accessible online and shall be updated on a

regular basis.

The competent authority shall refuse to grant a licence

under this Act in any of the following instances

(a)

if the application is not submitted in accordance

with the established form or in accordance with applicable

procedure; or

(b)

if the applicable fees have not been paid; or

(c)

if the competent authority, in its reasonable

discretion, is not satisfied that the applicant and all relevant

persons mentioned in article 15(8) are fit and proper; or

(d)

if it transpires that any information or

submission made to the competent authority is materially

false, misleading, inaccurate or incomplete; or

(e)

if the competent authority, in its reasonable

discretion, is not satisfied that -

(i)

the applicant has sound and prudent

management, robust administration arrangements and

adequate internal control or security mechanisms

Provided

that

such

arrangements,

procedures and mechanisms shall be comprehensive

and proportionate to the nature, scale and complexity

of the VFA services to be provided by the applicant;

or

(ii) where there are close links between the

applicant and another person or persons, such links

will not through any law, regulation, administrative

provision or in any other manner prevent it from

exercising effective supervision of that applicant

under the provisions of this Act or any rule

Provided that the competent authority may

from time to time, by means of rules issued under this

Act define the circumstances in which "close links"

are to be regarded as existing between any two or

more persons; or

(iii) the

applicant

will

comply

with

all

regulatory requirements applicable to licence holders

of the relevant category, including those listed in

article 23, and with any additional requirements that

the competent authority considers necessary; or

(iv) that the VFA service or services being

proposed is compliant with any law, regulations or

rules in force; or

(f)

if the competent authority, in its reasonable

discretion, believes that granting a licence to the applicant may

pose a risk to investors, the general public, the reputation of

Malta or the promotion of innovation, competition and choice;

or

(g)

if sufficient information as requested by the

competent authority has not been provided.

The burden of proving -

(a)

the person’s qualification to hold a licence or to

continue holding a licence; and, or

(b)

the determination in terms of the proviso to

article 13(1),

shall rest at all times on the applicant or the licence holder, as the

case may be.

The granting of a licence is a concession and a revocable

privilege, and no holder thereof shall be deemed to have acquired any

vested rights therein or thereunder.

A licence granted by the competent authority under this

Act or a qualifying holding or beneficial ownership in a licence

holder may not be assigned or transferred in any way whatsoever to

any other person without the prior written consent of the competent

authority, and any such assignment or transfer to any other person

without the competent authority’s consent shall be considered null

and void and constitute sufficient grounds for the competent authority

to cancel that licence.

(1)

The competent authority may at any time cancel

or suspend a licence in accordance with the provisions of this Act.

(2) Without prejudice to the generality of sub-article (1), the

competent authority may cancel or suspend a licence -

(a)

if it considers that the holder thereof is not a fit

and proper person to provide the VFA service he is authorised

to provide; or

(b)

if it considers that the holder thereof does not

fulfil the requirements of, or has contravened, any of the

provisions of this Act or of any regulations made or rules

issued thereunder, or has failed to satisfy or comply with any

obligation or condition to which he or the licence is subject by

virtue of or under this Act; or

(c)

if the competent authority has been furnished by

or on behalf of the licence holder with information which is

false, inaccurate or misleading, or if the licence holder has

obtained the licence by making false statements or by any

other irregular means; or

(d)

if the licence holder has not commenced to

provide the VFA service he has been authorised to provide

within twelve months from the date of issue of the licence or

has ceased to provide such VFA service; or

(e)

if it considers it desirable to cancel or suspend

the licence for the protection of investors and the general

public, and the reputation of Malta taking into account Malta’s

international commitments; or

(f)

at the request of the licence holder; or

(g)

if the licence holder is declared bankrupt or goes

into liquidation or makes a composition with its creditors or is

otherwise dissolved; or

(h)

if the licence holder has ceased to operate as a

result of a merger with another licence holder; or

(i)

in any of the circumstances under which the

competent authority would have been precluded from issuing

the licence under this Act or where under this Act it would

have been entitled to refuse the grant of such licence; or

(j)

after proper communication and investigation, at

the written request of another competent regulatory authority

which is carrying regulatory functions in relation to the

relevant licence holder.

(3) The competent authority, where so required, shall notify

the appropriate ESA and any other competent regulatory authority

which is carrying out regulatory functions in relation to the relevant

licence holder of any cancellation of a licence in terms of sub-article

(1)

Where the competent authority proposes -

(a)

to vary any condition to which the licence is

subject or to impose a condition thereon; or

(b)

to refuse an application for a licence or to cancel

or suspend a licence,

it shall give the applicant or the licence holder, as the case may be,

notice in writing of its intention to do so, setting out the reasons for

the decision it proposes to take.

(2) Every notice given under sub-article (1) shall state that

the recipient of the notice may, within such reasonable period after

the service thereof as may be stated in the notice, make

representations in writing to the competent authority giving reasons

why the proposed decision should not be taken, and the competent

authority shall consider any representation so made before arriving at

a final decision.

(3) The competent authority shall as soon as practicable

notify its final decision in writing to any of the persons to whom

notice is to be given under sub-article (1).

PART V

Board of Administration and Obligations of Licence Holders

(1)

Licence holders shall comply with and observe

any applicable regulations made and rules issued under this Act,

including with reference to prudential requirements, and shall be

considered as subject persons.

For the purposes of this sub-article, the term "prudential

requirements" shall include requirements on administration,

compliance, risk management, systems and security access protocols,

financial resources, capital adequacy, professional indemnity

insurance and any other related requirements included in the

regulations made or rules issued under this Act.

(2) Without prejudice to the generality of sub-article (1), a

licence holder shall ensure that all of its systems and security access

protocols are maintained at all times to appropriate high standards.

(1)

The licence holder shall ensure that -

(a)

members of its board of administration shall at

all times be of sufficient good repute, possess sufficient

collective knowledge, skills and experience and commit

sufficient time to perform their duties and be able to

understand the licence holder’s activities, including the main

risks. In this regard, the licence holder shall devote adequate

human and financial resources to the induction and training of

members of its board of administration;

(b)

the number of positions as administrator which

may be held by a member of its board of administration at the

same time shall take into account individual circumstances and

the nature, scale and complexity of the licence holder’s

activities; and

(c)

each member of its board of administration shall

act with honesty, integrity and independence of mind to

effectively assess and challenge the decisions of the senior

management where necessary and to effectively oversee and

monitor management decision-making.

(2) The board of administration of the licence holder, or the

licence holder itself in the case of an individual, shall be vested with

the responsibility to abide by all requirements under this Act and any

regulations made and rules issued thereunder

Provided that the board of administration or the licence

holder itself, as applicable, shall not be held responsible when they

prove that they have acted in good faith pursuant to their fiduciary

obligations and in terms of applicable legislation.

(1)

The licence holder shall provide the competent

authority with particulars in writing of any changes in the

information provided under this Act as soon as such licence holder

becomes aware of such changes and shall notify the competent

authority, on a continuous basis, of any changes or circumstances

which give rise to the existence of close links within the meaning in

article 17(e).

(2) Notwithstanding the generality of sub-article (1), any

substitutions or amendments which refer to upgrades, maintenance,

innovative evolution or mere replacement of operating systems shall

be notified to the competent authority where they have, or have the

potential to have, a material impact on investors or they are not in any

manner in accordance with any provision of this Act

Provided that the competent authority may issue rules in

terms of article 15(3)(b) in order to prescribe mandatory notification

in general or provide guidelines in particular cases.

Every licence holder shall pay to the competent

authority such periodic fee, and within such time, as may from time

to time be prescribed.

(1)

Licence holders shall act honestly, fairly and

professionally and shall comply with the requirements laid down in

this Act and any regulations made and rules issued thereunder, as

well as with other legal and regulatory requirements as may be

VIRTUAL FINANCIAL ASSETS

applicable.

(2) A licence holder shall be subject to fiduciary obligations

as established in the Civil Code, in so far as applicable.

(1)

Notwithstanding anything contained in any other

law, the consent of the competent authority given in writing shall be

required before a person may lawfully -

(a)

acquire, directly or indirectly, a qualifying

holding in a licence holder;

(b)

increase, directly or indirectly, an existing

holding which is not a qualifying holding so as to cause it to

become a qualifying holding in a licence holder;

(c)

further increase, directly or indirectly, such

qualifying holding in a licence holder as a result of which the

proportion of the voting rights or of the capital held would

reach or exceed twenty per cent (20%), thirty per cent (30%)

or fifty per cent (50%) or so, so that the licence holder, where a

company, would become its subsidiary;

(d)

dispose, directly or indirectly, of a qualifying

holding in a licence holder;

(e)

reduce, directly or indirectly, a qualifying

holding so as to cause it to cease to be a qualifying holding; or

(f)

reduce, directly or indirectly, a qualifying

holding so that the proportion of the voting rights or of the

capital held would fall below twenty per cent (20%), thirty per

cent (30%) or fifty per cent (50%) or so, so that the licence

holder, where a company, would cease to be its subsidiary.

(2) Without prejudice to the other provisions of this Act and

notwithstanding anything contained in any other law, and without

prejudice to sub-article (1), the consent of the competent authority

given in writing shall be required before a licence holder may

lawfully -

(a)

sell or dispose of its business or any significant

part thereof;

(b)

merge with any other company, whether licensed

under this Act or not

Provided that for the purposes of this sub-article,

no merger with a company that requires registration or any

other kind of authorisation whatsoever by the competent

authority under any Maltese law, other than this Act, or which

holds any other equivalent authorisation by a European or

overseas regulatory authority shall be permissible under this

Act;

(c)

undergo any reconstruction or division; or

(d)

increase or reduce its capital or effect any

material change in voting rights.

(3) It shall be the duty of all members of the board of

administration of a licence holder to notify the competent authority

immediately upon becoming aware that such person or licence holder

intends to take any of the actions set out in sub-articles (1) and (2).

(4) Upon receipt of such notification or receipt of such

information as the competent authority may lawfully require,

whichever is the later, the competent authority shall issue a notice -

(a)

granting unconditional consent to the taking of

the action; or

(b)

granting consent to the taking of the action

subject to such conditions as the competent authority may

deem appropriate; or

(c)

refusing consent to the taking of the action, and

if it refuses to grant consent, it shall inform the person or the

licence holder concerned in writing for the reason for its

refusal.

(5) In assessing the notification and the information referred

to in this article, the competent authority shall, in order to ensure the

sound and prudent management of the licence holder in which an

acquisition is proposed, and having regard to the likely influence of

the proposed acquirer on the licence holder, assess the suitability of

the proposed acquirer and the financial soundness of the proposed

acquisition in accordance with the following criteria

(a)

the reputation of the proposed acquirer;

(b)

the reputation, knowledge, skills and experience,

as set out in article 24(1)(a), of any member of the board of

directors and any member of senior management who will

direct the business of the licence holder as a result of the

proposed acquisition;

(c)

the financial soundness of the proposed acquirer,

in particular in relation to the type of business pursued and

envisaged in the licence holder in which the acquisition is

proposed;

(d)

whether the licence holder will be able to

comply and continue to comply with the prudential

VIRTUAL FINANCIAL ASSETS

requirements based on this Act and any regulations made and

rules issued thereunder and, where applicable, other European

Union laws, including whether the group of which it will

become a part has a structure that makes it possible to exercise

effective supervision, effectively exchange information among

the competent authority and the overseas regulatory authorities

and determine the allocation of responsibilities among the

competent authority and the overseas regulatory authorities;

(e)

whether there are reasonable grounds to suspect

that, in connection with the proposed acquisition, money

laundering or terrorist financing within the meaning of Article

1 of Directive 2015/849/EU is being or has been committed or

attempted, or that the proposed acquisition could increase the

risk thereof.

(6) If any person or any licence holder takes or decides to

take any action set out in sub-article (1) or (2) without obtaining the

consent of the competent authority, then, without prejudice to any

other penalty which may be imposed under this Act, the competent

authority shall have the power to make an order

(a)

restraining such person or licence holder from

taking, or continuing with, such action;

(b)

declaring such action to be null and void;

(c)

requiring such person or licence holder to take

such steps as may be necessary to restore the position existing

immediately before the action was taken;

(d)

restraining such person or licence holder from

exercising any rights which such action would, if lawful, have

conferred upon them; or

(e)

restraining such person or licence holder from

taking any similar action or any other action within the

categories set out in sub-articles (1) and (2).

(1)

No person, other than licence holders, may issue

or cause to be issued an advertisement relating to a VFA service in or

from within Malta unless its contents have been vetted and approved

by the licence holder’s board of administration.

(2) The competent authority may, from time to time, issue

such rules or directives to licence holders as it may consider

appropriate in order to set minimum standards and requirements

which are to be observed by licence holders when issuing or

approving advertisements in accordance with sub-article (1). Such

rules or directives may also include provision for such exemptions or

conditions as may be specified therein and may make different

provision for different cases or classes of cases, under such terms and

conditions as may be prescribed.

(3) The competent authority may impose such conditions,

limitations and restrictions on a licence holder with respect to the

issue or approval of advertisements, as it may consider appropriate.

Where the licence holder maintains a website, the person

responsible for the licence holder’s compliance function shall ensure

that its homepage at least contains such information and in such

format as may be required by the competent authority by means of

rules issued under this Act.

Notwithstanding any investigation provided for in this

Act, where a VFA licence holder considers that it is likely to become

unable to meet its obligations, it shall immediately inform the

competent authority in writing.

Without prejudice to any other obligations imposed

under this Act, a licence holder shall be required to submit to the

competent authority on an annual basis a certificate of compliance in

the form and manner required by the competent authority confirming

the licence holder’s compliance with all the obligations laid down in

this Act or any regulations made and rules issued thereunder during

the period concerned

Provided that in the event of a breach of any provision of

this Act, regulations made or rules issued thereunder, the licence

holder shall include the particular breach and any other additional

information as may be required by the competent authority in the

compliance certificate

Provided further that, where the licence holder is an

individual, the licence holder itself shall be required to submit the

compliance certificate to the competent authority.

PART VI

Prevention of Market Abuse

The prohibitions and requirements laid down in this Part

shall apply to acts carried out by any person in Malta or outside

Malta, as prescribed or as may be prescribed by or under this Act or

regulations made or rules issued thereunder, concerning virtual

financial assets that are admitted to trading on a VFA exchange, or

for which a request for admission to trading on such VFA exchange

has been made.

(1)

Insider dealing, recommending or inducing

another person to engage in insider dealing, as referred to in this

article, shall constitute an offence when committed intentionally.

(2) It shall also be an offence to attempt to commit any of

the offences referred to in sub-article (1).

(3) Inciting, aiding or abetting any of the offences referred

to in sub-article (1) shall also amount to an offence.

(4) For the purposes of sub-article (1), insider dealing arises

where a person possesses inside information and uses that

information by acquiring or disposing of, for its own account or for

the account of a third party, directly or indirectly, virtual financial

assets to which that information relates.

(5) For the purposes of sub-article (1), recommending that

another person engage in insider dealing, or inducing another person

to engage in insider dealing, arises where the person possesses inside

information and

(a)

recommends, on the basis of that information,

that another person acquire or dispose of virtual financial

assets to which that information relates, or induces that person

to make such an acquisition or disposal; or

(b)

recommends, on the basis of that information,

that another person cancels or amends an order concerning a

virtual financial asset to which that information relates, or

induces that person to make such a cancellation or amendment

Provided that the use of the recommendations or

inducements amounts to insider dealing where the person using the

recommendation or inducement knows that it is based upon inside

information.

(6) The provisions of this article apply to any person in the

situations or circumstances prescribed or as may be prescribed.

(1)

Unlawful disclosure of inside information shall

also constitute an offence under this Act when committed

intentionally.

(2) Inciting, aiding or abetting the offence referred to in

sub-article (1) shall also amount to an offence.

(3) For the purposes of this article, unlawful disclosure of

inside information arises where a person possesses inside information

and discloses that information to any other person, except in cases

where such disclosure is permitted pursuant to any provisions of this

Act, regulations made or rules issued thereunder.

(4) The provisions of this article apply to any person in the

situations or circumstances prescribed or as may be prescribed.

(5)

For the purposes of this Act, the onward disclosure of

recommendations or inducements referred to in article 34(5) amounts

to unlawful disclosure of inside information where the person

disclosing the recommendation or inducement knows that it was

based on inside information.

(6) This article shall be applied in accordance with the laws

of the freedom of the press and the freedom of expression.

(1)

Market manipulation, as referred to in this

article, shall constitute an offence in severe cases or when committed

intentionally.

(2) It shall also be an offence to attempt to commit any of

the offences referred to in sub-article (1).

(3) Inciting, aiding or abetting the offence referred to in

sub-article (1) shall also amount to an offence.

(4) For the purposes of this article, "market manipulation"

means the manipulation or attempted manipulation of a virtual

financial asset or a benchmark through the employment of an abusive

strategy that may be carried out by any available means of trading or

other means, as prescribed or as may be prescribed.

Without prejudice to any other obligations under this

Act, regulations made or rules issued thereunder, a VFA exchange

shall have in place effective systems, procedures and arrangements to

monitor and detect market abuse and where it suspects that there may

exist circumstances to indicate that any violation of the provisions

under this Part may have been committed, is being committed or is

likely in the circumstances to be committed, it shall immediately

report such suspicion to the competent authority.

PART VII

Regulatory and Investigatory Powers

(1)

The Minister, acting on the advice of the

competent authority, may make regulations to give effect to the

provisions of this Act, and without prejudice to the generality of the

foregoing may, by such regulations, in particular, do any of the

following

(a)

amend the definitions contained in this Act;

(b)

regulate the activities of issuers and licence

holders, as well as services provided and activities carried on

in conjunction therewith or in relation thereto; provide for any

matter he may deem expedient including the creation and

exercise of rights by or for the benefit of the public, the

imposition of duties and obligations on the issuers, licence

holders or persons responsible for the management or

VIRTUAL FINANCIAL ASSETS

administration thereof, the regulation of branches established

by licence holders, outsourcing or agency arrangements and of

any fees and, or any other charges imposed directly or

indirectly on investors; prescribe investment restrictions

applicable to retail investors investing or wishing to invest, as

applicable, in virtual financial assets, and for the purpose of

this paragraph "retail investor" shall mean an investor who is

considered to be a retail client in terms of Article 4(11) of

MiFID but shall exclude any retail client who may be treated

as professional on request within the meaning of Annex II to

MiFID; provide for the safekeeping and custody of the

cryptographic keys and for the requirement to appoint a

custodian, and prescribe and regulate in the most extensive

manner the functions, duties, responsibilities and obligations

of the custodian, and for the purpose of this paragraph

"custodian" shall include a sub-custodian; require the keeping

of records with respect to the transactions and financial

position of issuers and licence holders and for the inspection of

those records, and prescribe reporting and disclosure

requirements, including the preparation of periodical reports

and the furnishing of those reports to investors, unitholders

and to others;

(c)

establish schemes or other arrangements for the

compensation of investors in cases where licence holders or

any categories thereof as may be specified, are unable to

satisfy their obligations towards investors or claims in respect

of any liability incurred by them in connection with the

carrying out of any activity in regard to which they are

licensed, and to regulate the management and the financing of

any such schemes or arrangements, and the contributions and

levies to be paid thereto, to set the minimum and maximum

levels of compensation payable thereunder and may under

such schemes and arrangements distinguish between different

classes of investors and exclude certain classes from

compensation, and to make provision for the regulation of and

for any other aspect related to such schemes or arrangements

and may moreover provide that such schemes or arrangements

as may be prescribed shall have a legal personality distinct

from that of the contributors thereto and of the competent

authority and provide for the judicial and legal representation

thereof; and such schemes shall be exempt from the payment

of income tax as from the date of establishment of such

schemes;

(d)

define the criteria for determining whether a

holding is an indirect holding for the purposes of determining

whether a qualifying holding exists;

(e)

define the criteria for determining whether the

systems and security access protocols of issuers, applicants or

licence holders, as applicable, meet or are maintained to the

appropriate high international standards that may be

established from time to time;

(f)

regulate the promotion or sale by or on behalf of

any issuer or licence holder, and by any means, of an initial

virtual financial asset offering or of a VFA service or of any

DLT asset, including the criteria and procedures for the

granting or refusing of consent by the competent authority

pursuant to the provisions of article 30;

(g)

amend the provisions of article 50 on the

circumstances in which auditors are obliged to communicate

information to the competent authority, to prescribe

regulations governing the disclosure by auditors of

information pursuant to article 50 and to establish supervisory

and disciplinary procedures for auditors in respect of their

duties under the provisions of article 50;

(h)

regulate

the

drawing-up,

registration,

publication and distribution in Malta of whitepapers relating to

offerings, admission or trading of virtual financial assets on a

VFA exchange where the respective issuer’s head office is

located in a country outside Malta and to make provision for

the recognition of such whitepapers taking into account the

obligations emanating from European legislation or Malta’s

international commitments;

(i)

provide for and regulate the payment by any

person of registration, licence or other fees and such other

charges payable to the competent authority in respect of any

matter provided for, by or under this Act or any regulations

made under this article, as may be prescribed;

(j)

exempt any issuer, licence holder or any other

person, VFA service, DLT asset, whitepaper or advertisement

from any one or more of the provisions of this Act subject to

such variations, additions, adaptations and modifications as

may be prescribed and subject to such conditions or other

requirements, including other forms of registration,

authorisation and notification procedures, as may be

prescribed;

(k)

establish prudential requirements for licence

holders; regulate the supervision on a consolidated basis,

provide for the consultation, co-ordination, co-operation and

the sharing and exchange of information with national,

European and other third country regulatory authorities as may

be necessary; provide for the exchange of information with the

ESRB, central banks which are members of the European

VIRTUAL FINANCIAL ASSETS

System of Central Banks, including the Central Bank of Malta,

exchange of information with ESAs and exchange of

information with other departments of government

administrations in other Member States responsible for the law

on the supervision of institutions, financial institutions and

insurance undertakings and with inspectors acting on behalf of

those departments as may be necessary; provide for the

establishment of colleges of supervisors; provide for the

exercise of powers by the competent authority on issuers and

licence holders, or their effective managers; provide for the

establishment and imposition of administrative penalties on

issuers, licence holders or others as specified therein or other

measures for the contravention of any of the regulations, and

to provide for appeals therefrom to the Tribunal or any other

tribunal that he may prescribe; provide for the obligations of

the competent authority to report to the ESAs and the

European Commission as may be required and specified in the

said regulations;

(l)

provide for reporting and other requirements and

conditions which a person must satisfy, on a continuing and

ongoing basis and to establish the circumstances and the

manner in which requirements and conditions may be varied,

suspended or revoked;

(m)

establish centralised or decentralised data

repositories or other arrangements for the collection,

recording, organisation, structuring, storage, adaptation or

alteration, retrieval, consultation, use, disclosure by

transmission, dissemination or otherwise making available,

alignment or combination, restriction, erasure or destruction,

in accordance with European legislation, of such information

and documentation as may be required by subject persons to

fulfil their customer due diligence requirements provided for

under the Prevention of Money Laundering and Funding of

Terrorism Regulations; and to make provision for the

regulation of and for any other aspect related to such data

repositories or arrangements and may moreover provide that

such data repositories or arrangements as may be prescribed

shall have a legal personality distinct from that of the subject

persons thereto and of the competent authority and provide for

the judicial and legal representation thereof;

(n)

in consultation with the competent authority,

amend the Second Schedule in order to include any services

which relate to virtual financial assets and which are not listed

in the said Second Schedule and make regulations relative

thereto;

(o)

transpose, implement and give effect to the

provisions and requirements of Directives, Regulations and

any other legislative measures of the European Union

requiring transposition and, or implementation, as they may be

amended from time to time, including any implementing

measures that may be issued thereunder and relating to DLT

assets, issuers, licence holders and others as may be specified

therein; regulations made under this paragraph, and strictly

related to transposition or implementation as aforesaid, may

provide that any provision of this Act or of any other law shall

not apply to matters falling under the regulations, and that in

so far as any of the provisions of the regulations are

inconsistent with the provisions of this Act or of any other law,

such provisions in any such regulations shall prevail;

(p)

provide for arrangements for the investigation of

complaints about issuers or licence holders;

(q)

prescribe anything that is to be or which may be

prescribed;

(r)

provide for any matter incidental to or connected

with any of the above.

(2) Regulations made under this article may also contain

provisions for enabling a person who has entered, or offered to enter,

into a VFA agreement with a licence holder to rescind the agreement

or withdraw the offer within such period and in such manner as may

be prescribed, and in particular, but without prejudice to the

generality of the foregoing, may make provision -

(a)

for requiring the service of notice with respect to

the rights exercisable under the regulations;

(b)

for the restitution of assets and the making or

recovery of payments where those rights are exercised;

(c)

for such other matters as are incidental to or

connected with any of the above.

(3) Regulations made under this article, may be made

subject to such exemptions or conditions as may be specified therein,

may make different provision for different cases, circumstances or

purposes and may give to the competent authority such powers of

adaptation of the regulations as may also be so specified.

(4) Where regulations have been made in terms of this

article, the competent authority may issue rules within the meaning of

article 15 for the better carrying out and to better implement the

provisions of the regulations.

(5)

Regulations made under this article may impose

(a)

administrative penalties which may not exceed

VIRTUAL FINANCIAL ASSETS

one hundred and fifty thousand euro (€150,000) for each

infringement or failure to comply, as the case may be;

(b)

punishments or other penalties in respect of any

contravention or failure of compliance not exceeding a fine

(multa) of fifteen million euro (€15,000,000) or up to three

times the profits made or losses avoided by virtue of the

offence, whichever is the greater, or to imprisonment for a

term not exceeding six years, or both such fine and

imprisonment; and

(c)

administrative penalties and fines higher than

one hundred and fifty thousand euro (€150,000), where

deemed necessary or appropriate for any contravention of or

failure of compliance with any EU Directive or EU Regulation

or of any regulations made under this article to transpose or to

give effect to any EU Directive or EU Regulation.

(6) Regulations made under this Act and any amendment or

revocation of such regulations, may be published in the English

language only.

(7) The exercise of any of the powers assigned under this

article shall be subject to any obligations or rights arising from

Malta’s international commitments.

(1)

The competent authority may, by notice in

writing, require -

(a)

any person who is or was providing, or who

appears to be or to have been providing a VFA service as well

as any persons that control them or are controlled by them;

(b)

any issuer, intermediary involved in the initial

VFA offering as well as any persons that control them or are

controlled by them;

(c)

any person who has issued, or appears to have

issued an advertisement falling within the provisions of

articles 6 or 29;

(d)

an auditor of a person regulated under this Act;

(e)

any other person who appears to be in possession

of relevant information or documentation,

to do all or any of the following

(i)

to furnish to the competent authority, at

such time and place and in such form as it may

specify, such information and documentation as it

may require, including the power to require existing

telephone, existing data traffic and existing DLT

records, with respect to any such service, DLT asset,

advertisement or website as aforesaid, or with respect

to any person with whom the licence holder has close

links within the meaning of article 17;

(ii) to review the determination made in terms

of articles 3 or 13 and confirm in writing the

competent authority that such determination is true

and accurate or otherwise;

(iii) to furnish to the competent authority any

information or documentation aforesaid verified in

such manner as it may specify;

(iv) to attend before the competent authority, or

before a person appointed by it, at such time and

place as it may specify, to answer questions and

provide information and documentation with respect

to any such service, scheme or advertisement as

aforesaid

Provided that the powers in this article shall not permit

the competent authority to demand information about source codes of

any proprietary technology or of information of highly sensitive,

intellectual property which is protected by law and which relates to

innovative DLT or smart contracts.

(2) Without prejudice to anything which the competent

authority may require under sub-article (1), all information in respect

of virtual financial assets traded on a VFA exchange and held by the

exchange shall be freely accessible to the competent authority

Provided that the provisions of this sub-article shall also

be applicable where a virtual financial asset is determined by the

competent authority to be electronic money or a financial instrument

in terms of article 13(2)(b).

(3) The competent authority may take copies of any

documents furnished or provided under this article.

(4) Where the person required to provide information or

documentation under this article does not have the relevant

information or documentation, he shall disclose to the competent

authority where, to the best of his knowledge, that information or

documentation is, and the competent authority may require any

person, whether indicated as aforesaid or not, who appears to it to be

in possession of that information or documentation, to provide it.

(5) A statement made and documentation provided in

pursuance of any requirement under this article may be used in

evidence against the person making the statement or providing the

documentation as well as against any person to whom they relate.

(6) The provisions of this article shall not apply to

information or documentation which is privileged in accordance with

the provisions of article 642(1) of the Criminal Code or which refer

to cryptographic keys belonging to the person required to provide

information or documentation under this article

Provided that the provisions of this sub-article shall not

apply to the actual information protected by the cryptographic keys.

(7) The power to require the production of documentation

under the provisions of this article shall be without prejudice to any

lien or charge claimed by any person in relation to such

documentation.

(8) Where the competent authority has appointed a person

under article 42(1)(c), such person shall, for the purposes of carrying

out his functions under his appointment, have all the powers

conferred on the competent authority by this article and a

requirement made by it shall be deemed to be and have the same

force and effect as a requirement of the competent authority.

(9) Without prejudice to the other provisions of this article,

a licence holder may be required to submit to the Central Bank of

Malta such information as the Bank may reasonably require for the

discharge of its duties under the Central Bank of Malta Act.

(1)

The competent authority may, whenever it

deems it necessary or expedient, appoint an inspector or inspectors to

investigate and report on the affairs of any issuers or licence holders

or any other persons referred to in article 39(1).

(2)

An inspector appointed under sub-article (1) -

(a)

may also, if he thinks it necessary or expedient

for the purposes of that investigation, investigate the affairs of

any person mentioned in sub-article (1);

(b)

shall have and may exercise all the powers

conferred on the competent authority by article 39, and any

requirement made by it shall be deemed to be and have the

same force and effect as a requirement of the competent

authority;

(c)

may, and if so directed by the competent

authority shall, make interim reports and on the conclusion of

his investigation shall make a final report to the said authority.

(3) The competent authority shall have power to order that

all expenses of, and incidental to, an investigation pursuant to this

article be paid by the persons concerned.

(4) For the purposes of this article, an inspector shall be a

person considered by the competent authority as possessing suitable

expertise to exercise such function.

(1)

Without prejudice to any of the powers

conferred on it by articles 39 and 40, the competent authority may,

whenever it deems it necessary, and whether upon a report by an

inspector appointed under article 40 or not, give, by notice in writing,

such directives as it may deem appropriate in the circumstances; and

any person as is referred to in article 39(1) to whom the notice is

given shall obey, comply with and otherwise give effect to any such

directive within the time and in the manner stated in the directive or

further directive.

(2) Without prejudice to the generality of the foregoing

provisions of this article, a directive under this article may -

(a)

require anything to be done or be omitted to be

done, or impose any prohibition, restriction or limitation, or

any other requirement, including any requirement emanating

from European Union legislation, and confer powers, with

respect to any offering or trading of DLT assets, VFA service,

transaction or other act, or to any assets, or to any other thing

whatsoever;

(b)

require that any person having functions in

relation to the issuer or licence holder be prohibited,

temporarily or otherwise, suspended from carrying out

activities under this Act, or removed and replaced by another

person acceptable to the competent authority;

(c)

require an issuer, licence holder or any person

who is or was, or who appears to be or to have been

undertaking an activity or providing a service regulated under

this Act to cease operations and to wind up its affairs, in

accordance with such procedures and directions as may be

specified in the directive, which may provide for the

appointment of a person to take possession and control of all

documents, records and assets belonging to or in the

possession or control of the issuer, licence holder or such other

person;

(d)

require a licence holder to submit a financial

recovery plan, as may be determined in the rules, if it

considers that the interests of investors, consumers, creditors

or other interested persons are likely to be prejudiced owing to

a deterioration in the financial position of the licence holder;

(e)

require the removal of a virtual financial asset

VIRTUAL FINANCIAL ASSETS

from trading on a VFA exchange or the suspension of trading

in such virtual financial asset

Provided that the provisions of this paragraph

shall also be applicable where a virtual financial asset is

determined by the competent authority to be electronic money

or a financial instrument in terms of article 13(2)(b);

(f)

request any person to take steps to reduce the

size of the position or exposure

Provided that in applying the provisions of paragraph

(c), the competent authority may also appoint a competent person to

act as liquidator for the purposes of winding up the affairs of an

issuer or licence holder under this Act; and such person shall be the

liquidator of the issuer or licence holder for all purposes of law to the

exclusion of any other person.

(3) The power to give directives under this article shall

include the power to vary, alter, add to or withdraw any directive, as

well as the power to issue new or further directives.

(4) Where the competent authority is satisfied that the

circumstances so warrant, it may at any time make public any

directive it has given under any of the provisions of this article.

(1)

Without prejudice to the powers conferred to the

competent authority under this Act, the competent authority may,

where it is satisfied that sufficient circumstances exist, proceed to

take any one or more of the following measures

(a)

appoint a person to advise the issuer or licence

holder in the proper conduct of their business;

(b)

appoint a person to take charge of the assets of

the issuer or licence holder, or any portion of them, for the

purposes of safeguarding the interests of investors, consumers,

creditors or, if any, unitholders, of the issuer or licence holder;

(c)

appoint a person to assume control of the

business of the issuer or licence holder, either to carry on that

business or to carry out such other function or functions in

respect of such business, or part thereof, as the competent

authority may direct;

(d)

fix the remuneration to be paid by the issuer or

licence holder to any person appointed under article 41 or

under this article;

(e)

do such other act as it may deem appropriate in

the circumstances to give better effect to the implementation

of the provisions of this article,

and, having adopted any one or more of the measures aforesaid, the

competent authority may further proceed in any one or more such

measures, whether in addition thereto or in substitution therefor.

(2)

Where a person is appointed by the competent authority-

(a)

under sub-article (1)(a), it shall be the duty of

the issuer or licence holder, as applicable, to act in accordance

with the advice given by such person unless and until the

competent authority, on representation made to it, directs

otherwise;

(b)

under sub-article (1)(b), the issuer or licence

holder, as applicable, shall deliver to such person all the assets,

whether movable or immovable, of which he is placed in

charge, and all the powers, functions and duties of the said

issuer or licence holder in respect of those assets, including, if

such issuer or licence holder is a legal person, those

exercisable by the legal person in a general meeting, or by the

members of the board of administration, or by any other

person, including the legal and judicial representation of such

legal person, shall be exercisable by and vest in the person

appointed under the said paragraph to the exclusion of any

other person;

(c)

under sub-article (1)(c), the issuer or licence

holder, as applicable, shall submit its business to the control of

such person and shall provide such person with such facilities

as may be required to carry on that business or to carry out the

functions assigned to such person under the said paragraph;

and all the powers, functions and duties of the said issuer or

licence holder, including, if such issuer or licence holder is a

legal person, those exercisable by the legal person in a general

meeting, or by the members of the board of administration, or

by any other person, including the legal and judicial

representation of such legal person in all matters, shall be

exercisable by and vest in such person to the exclusion of any

other person.

(3) The competent authority may, where it feels it is in the

best interest of the public so to do, make or issue public statements or

notices giving warnings or information about any measure taken in

terms of this article.

(4) The competent authority may require the issuer or

licence holder concerned to pay all the expenses of, and incidental to,

the publication or issue of public statements or notices pursuant to

this article, or such part thereof as it may deem appropriate; and any

sum so due shall be recoverable by the competent authority in the

same manner as an administrative penalty imposed under this Act.

(1)

Any officer, employee or agent of the competent

authority, on producing, if required, evidence of his authority, may

enter premises occupied by a person on whom a notice has been

served under article 39 or whose affairs are being investigated under

article 40, for the purpose of obtaining there the information or

documents required by that notice, or otherwise for the purpose of the

investigation, and of exercising any of the powers conferred by the

said articles.

(2) Where any officer, employee or agent of the competent

authority has reasonable cause to believe that if such notice as is

referred to in sub-article (1) were served it would not be complied

with or that any documents to which it could relate would be

removed, tampered with or destroyed, such person may, on

producing, if required, evidence of his authority, enter any premises

referred to in sub-article (1) for the purpose of obtaining there any

information or documents specified in the authority, being

information or documents that could have been required under such

notice as is referred to in sub-article (1).

(3) For the purposes of any action taken under the

provisions of this article, the competent authority may request the

assistance of the Commissioner of Police, who may for such purpose

exercise such powers as are vested in it for the prevention of offences

and the enforcement of law and order.

(1) (a) The competent authority may, in accordance

with rules issued under this Act, and whether of its own motion or at

the request of a VFA exchange on which a virtual financial asset has

been admitted to trading, discontinue or suspend the trading of such

virtual financial asset if it is satisfied that there are circumstances

which warrant such suspension or discontinuance.

(b) Without prejudice to the right of the

competent authority under paragraph (a) to demand suspension or

removal of a virtual financial asset from trading, a VFA exchange

operator may suspend or remove from trading a virtual financial asset

which no longer complies with the definition of a virtual financial

asset or the bye-laws of the VFA exchange unless such a step would

be likely to cause significant damage to the investors’ interests or the

orderly functioning of the VFA exchange. The VFA exchange

operator that suspends or removes from trading a virtual financial

asset shall make public this decision and communicate the relevant

information to the competent authority. Where required, the

competent authority shall inform the European regulatory authorities

of the other Member States or EEA States of this decision.

(c) When the competent authority demands the

suspension or removal of a virtual financial asset from trading on one

or more VFA exchanges, it shall immediately make public its

decision and inform any regulatory authority, as required, pursuant to

the obligations emanating from European legislation or Malta’s

international commitments.

(d) A VFA exchange operator that suspends or

removes from trading a virtual financial asset shall also suspend or

remove any derivatives thereof which relate or are referenced to that

virtual financial asset as may be necessary to support the objectives

of the suspension or removal of the underlying virtual financial asset.

The VFA exchange operator shall make public its decision on the

suspension or removal of the virtual financial asset and of any related

derivatives and communicate the relevant decisions to the competent

authority

Provided that the term "derivatives" in this

paragraph shall exclude the derivatives as referred to in points (4) to

(10) of Section C of Annex I to MiFID.

(e) Paragraph (d) shall also apply when the

suspension from trading of a virtual financial asset or derivatives

thereof which relate or are referenced to that virtual financial asset is

lifted.

(f) The notification procedure referred to in

paragraph (d) shall also apply in the case where the decision to

suspend or remove from trading a virtual financial asset or

derivatives thereof which relate or are referenced to that virtual

financial asset is taken by the competent authority.

(2) If the trading of any virtual financial asset is suspended

under sub-article (1) such virtual financial asset may still be treated

as being traded on a VFA exchange for such purposes as may be set

out in rules issued under this Act.

(3) If the competent authority discontinues or suspends the

trading of any virtual financial assets, the issuer shall have a right of

appeal to the Tribunal in terms of article 51.

(4) This article shall also be applicable where a virtual

financial asset is determined by the competent authority to be

electronic money or a financial instrument in terms of article

13(2)(b).

(1)

If the competent authority -

(a)

proposes to discontinue or suspend the trading of

a virtual financial asset on a VFA exchange; or

(b)

decides to suspend the trading of a virtual

financial asset on a VFA exchange with immediate effect,

it must give the issuer of such virtual financial asset notice in writing

Provided that a notice under this sub-article shall not be

required when a virtual financial asset has been admitted to trading

irrespective of the issuer’s will.

(2) The discontinuance or suspension of the trading of a

virtual financial asset shall take effect immediately or on such date as

may be specified in the notice under sub-article (1).

(3)

A notice given under sub-article (1) shall -

(a)

give details of the discontinuance or suspension;

(b)

state the competent authority’s reason for the

discontinuance or suspension, provided that the interest of a

VFA exchange or the interest of the public or the investors

shall constitute sufficient reason;

(c)

inform the issuer of a virtual financial asset that

he may make representations to the competent authority within

such period as may be specified in the notice; and

(d)

inform the issuer of the date on which the

discontinuance or suspension will take effect or of the date on

which the suspension took effect if the notice under sub-article

(1) states that suspension is to take place with immediate

effect

Provided that the obligation to give notice of a decision

to suspend the trading of a virtual financial asset and the right of the

issuer to make representations in relation thereto shall be without

prejudice to the power of the competent authority to suspend the

trading of any virtual financial assets with immediate effect.

(4) The competent authority may extend the period within

which representations may be made to it.

(5) If having considered any representations made by the

issuer of a virtual financial asset the competent authority decides -

(a)

to discontinue or suspend the trading of a virtual

financial asset; or

(b)

if the suspension has taken effect, not to cancel

it,

the competent authority shall give the issuer of a virtual financial

asset notice in writing of its decision.

(6) If the competent authority decides to discontinue or

suspend the trading of a virtual financial asset, or if the suspension

has taken effect, not to cancel it, the issuer of the virtual financial

asset concerned shall have a right of appeal to the Tribunal and a

notice given under sub-article (5) shall inform the issuer of his right

to refer the matter to the Tribunal.

(7) The effect of cancelling a discontinuance is that the

virtual financial asset concerned is to be re-admitted to trading on the

VFA exchange on which it had been admitted to trading.

(8) The provisions of this article shall also be applicable

where a virtual financial asset is determined by the competent

authority to be electronic money or a financial instrument in terms of

article 13(2)(b).

(1)

Without prejudice to the provisions of article 45,

the competent authority shall have the power to suspend temporarily

the trading in a virtual financial asset on any VFA exchange, if in its

opinion, the orderly transaction of business is being prevented, or is

likely to be prevented.

(2) The Minister may recommend to the competent

authority the temporary suspension of trading if he is of the opinion

that the orderly transaction of business of a VFA exchange is being

disrupted because of any occurrence which in the opinion of the

Minister merits such closure.

(3) The competent authority may order that, for such time as

it may determine, no trading of any kind may be transacted in one or

more specified virtual financial assets if it has reason to believe that

this would be in the interest of the VFA exchange concerned, the

public or investors in general.

(4) No transaction may be executed at any time in the event

of the temporary suspension of trading under this article. Any

transaction so executed in contravention of this sub-article shall be

invalid.

(5) This article shall also be applicable where a virtual

financial asset is determined by the competent authority to be

electronic money or a financial instrument in terms of article

13(2)(b).

Without prejudice to any other powers assigned to the

competent authority in terms of this Act, the competent authority

shall introduce a test applicable to issuers and licence holders for the

purpose of determining whether a DLT asset qualifies as electronic

money, a financial instrument, virtual financial asset or virtual token

Provided that such test shall be applicable prior to the

submission of the whitepaper to the competent authority or the

provision of a VFA service, as the case may be.

(1)

Without prejudice to any other powers assigned

to the competent authority in terms of this Act, where a licence holder

or the secretary, a member of the board of administration or any other

person responsible for a licence holder contravenes or fails to comply

with any of the conditions imposed in a licence, and, or where the

competent authority is satisfied that a person’s conduct amounts to a

breach of any of the provisions of this Act, regulations made or rules

issued thereunder, including failure to cooperate in an investigation,

the competent authority may by notice in writing and without

recourse to a court hearing impose on the licence holder, secretary,

member of the board of administration and, or any other person as the

case may be, an administrative penalty which may not exceed one

hundred and fifty thousand euro (€150,000) for each infringement or

failure to comply, as the case may be

Provided that the provisions of this sub-article shall

apply to issuers mutatis mutandis.

(2) Administrative penalties or other measures that may be

imposed by the competent authority on issuers, licence holders or

others, as may be specified, may be imposed in the form of a fixed

penalty, a daily penalty, or both.

(3) The imposition by the competent authority of an

administrative penalty in terms of this article shall be without

prejudice to any other consequence of the act or omission of the

offender under civil or criminal law

Provided that in all cases where the competent authority

imposes an administrative penalty in respect of anything done or

omitted to be done by any person and such act or omission also

constitutes a criminal offence, no proceedings may be taken or

continued against the said person in respect of such criminal offence.

(4) The competent authority may, by means of a public

statement, disclose the name of the person sanctioned, the particular

breach of the provision of this Act, regulations made or rules issued

thereunder, and the penalty or administrative measure imposed. The

competent authority shall withhold such public disclosure where it

deems that such disclosure would seriously jeopardise the financial

markets, be detrimental to the interests of investors or consumers or

cause disproportionate damage to the parties involved.

Any decision taken under this Act by the competent

authority, including any rules issued or regulations made thereunder,

shall state the grounds on which such a decision has been based.

PART VIII

Duty of Auditors

(1)

A licence holder shall appoint an auditor who

shall have the duty to report immediately to the competent authority

any fact or decision of which he becomes aware in his capacity as

auditor of such licence holder which -

(a)

is likely to lead to a serious qualification or

refusal of the auditor’s report on the accounts of such licence

holder; or

(b)

constitutes or is likely to constitute a material

breach of the legal or regulatory requirements applicable to the

licence holders in or under this Act; or

(c)

gravely impairs the licence holder’s ability to

continue as a going concern; or

(d)

relates to any other matter which may be

prescribed.

(2) An auditor of a licence holder shall report to the

competent authority any facts or decision as specified in sub-article

(1) of any person having close links with such licence holder within

the meaning in article 17, of which he becomes aware in his capacity

as auditor of the licence holder or of the person having such close

links.

(3) No duty (including the duty of professional secrecy) to

which an auditor of the licence holder may be subject, shall be

regarded as contravened by reason of his communicating in good

faith to the competent authority, whether or not in response to a

request from it, any information or opinion on a matter of which the

auditor has become aware in his capacity as auditor of that licence

holder and which is relevant to any functions of the competent

authority under the provisions of this Act or is required to be

communicated by virtue of sub-article (1).

(4) The matters prescribed for the purposes of sub-article

(1)(d) may include matters related to persons other than the licence

holder.

(5) An auditor of a licence holder shall, in the absence of

compelling reasons not to do so, simultaneously report the

information specified in sub-articles (1) and (2), in accordance with

the provisions of sub-articles (3) and (4), to the board of

administration of the licence holder.

(6) An auditor of a licence holder shall report annually to

the competent authority on the licence holder’s systems and security

access protocols in the manner and format required by the competent

authority.

(7)

The provisions of this article shall apply to issuers mutatis

VIRTUAL FINANCIAL ASSETS

mutandis.

PART IX

Appeals, Remedies, Sanctions and Confidentiality

(1)

Subject to the provisions of this article and

without prejudice to any other article under this Act, an appeal shall

lie to the Tribunal with respect to

(a)

any decision under article 12(c) and (d);

(b)

any notice in terms of article 13(2);

(c)

any administrative penalty imposed under article

48;

(d)

any refusal, variation, cancellation or suspension

of a licence under article 22(3);

(e)

any notice issued or any order made in terms of

articles 28, 44 and 45;

(f)

any decision concerning an advertisement under

articles 6 or 29;

(g)

any punishment or penalty imposed under article

38(5);

(h)

any directive given under article 41; or

(i)

any measure taken in terms of article 42(1), (2)

and (4).

(2) The provisions of article 21 of the Malta Financial

Services Authority Act shall apply mutatis mutandis to appeals that

may be brought before the Tribunal under this article.

(1)

If, on an application by the competent authority

made to the court, such court is satisfied -

(a)

that there is reasonable likelihood that a person

will contravene any of the provisions of this Act or of any

regulations made or rules issued thereunder, or will contravene

or fail to comply with any condition, obligation, requirement,

rules, directive, or order made or given under any of the

provisions of this Act; or

(b)

that a person has contravened any such provision

or has contravened or failed to comply with any such

condition, obligation, requirement, rules, directive, or order

and that steps could be taken to remedy the contravention or

failure,

the court may give such orders as it may deem appropriate to restrain

the contravention or, as the case may be, to require the person

referred to in paragraph (a) or (b), or any other person who appears to

the court to have been knowingly concerned in the contravention, to

take such steps as the court may direct.

(2) If, on an application made under sub-article (1), the

court is satisfied that a person has entered into any transaction in

contravention of any of the provisions of this Act, the court may

order that person and any other person who appears to the court to

have been knowingly concerned in the contravention to take such

steps as the court may direct for restoring the parties to the position in

which they were before the transaction was entered into.

(3) If, on an application made under sub-article (1), the

court is further satisfied that -

(a)

profits have accrued to any person as a result of

the contravention; or

(b)

an investor has suffered loss or been otherwise

adversely affected as a result of that contravention,

the court may order the person responsible for the contravention to

pay into court such sum as appears to it to be just having regard to the

extent of the profit, loss or adverse effect as aforesaid, and order such

sum to be paid out as the court may direct to the persons who have

entered into transactions as a result of which profits have accrued or

losses or adverse effects have been suffered as aforesaid.

(4) For the purposes of this article the court may order the

production by any person of such accounts and the provision of such

information, and verified in such manner, as the court may deem

appropriate.

(5) The provisions of this article shall be without prejudice

to any right of any aggrieved person to bring proceedings directly in

respect of any right such person may otherwise have independently of

the competent authority.

(1)

Without prejudice to any other article under this

Act, any person who contravenes or fails to comply with any of the

provisions of articles 3, 7, 13, 25, 26, 28, 39, 41 or 57 or of article 39

as applied by article 40 or of any court order made under article 52 or

of any regulations made under article 38 shall be guilty of an offence.

(2) Any person who for the purposes of, or pursuant to, any

of the provisions of this Act or of any regulations made thereunder, or

any condition, obligation, requirement, directive or order made or

given as aforesaid, furnishes information or makes a statement which

he knows to be inaccurate, false or misleading in any material

respect, or recklessly furnishes information or makes a statement

which is inaccurate, false or misleading in any material respect, shall

be guilty of an offence.

(3) Any person who is knowingly a party to the carrying on

of any activity regulated under this Act, or any regulations made or

rules issued thereunder, with a fraudulent intent or for a fraudulent

purpose, shall be guilty of an offence.

(4) Any person who by any statement, promise or forecast

which he knows to be misleading, false or deceptive, or by any

dishonest concealment of material facts, or by the reckless making

(whether dishonest or otherwise) of any statement, promise or

forecast which is misleading, false or deceptive, induces or attempts

to induce another person to enter into or offer to enter into a VFA

agreement, shall be guilty of an offence.

(5) Any person who with intent to avoid detection of the

commission of an offence under this Act removes, destroys, conceals

or fraudulently alters any book, document or other paper or record,

either tangible or intangible, shall be guilty of an offence.

(6) Any person who intentionally obstructs a person from

exercising rights conferred by this Act shall be guilty of an offence.

(1)

An issuer or a licence holder, other than a licence

holder referred to in sub-article (2), guilty of an offence under the

provisions of article 53 shall be liable on conviction to a fine (multa)

not exceeding ten million euro (€10,000,000) or up to three times the

profits made or losses avoided by virtue of the offence, whichever is

the greater, or to imprisonment for a term not exceeding six years, or

both such fine and imprisonment, unless such fine or term of

imprisonment is otherwise imposed under article 38(5).

(2)

Repealed by Act XIV.2024.15.

Where obligations imposed in terms of the Act or any

regulations made or rules issued thereunder apply to the issuer,

licence holder or to any other legal entity, in the event of a breach,

sanctions can also be applied, subject to the conditions laid down in

national law, to the members of the body of administration of the

legal entity concerned, and to other individuals who are responsible

for the breach under national law.

(1)

If it appears to the competent authority that a

person who holds or who held a licence, or registration, or any other

person, has contravened any of the provisions of this Act or of any

regulations made under this Act or has contravened or failed to

comply with any condition, obligation, requirement, rules, directive

or order made or given under any of the provisions of this Act, the

competent authority may publish a statement to that effect.

(2) Nothing in this article shall restrict or otherwise

prejudice the powers of the competent authority under article 41(4).

(1)

Information obtained by the competent authority

or by its officers, employees or agents, as well as by auditors,

inspectors or any other persons engaged by the competent authority

for the purposes of, or pursuant to, any of the provisions of this Act,

or of any regulations made or rules issued thereunder, or in the

discharge of any functions under any of the said provisions, shall be

treated as confidential and protected by the duty of professional

secrecy, and shall not be disclosed to any other person, except in the

following cases

(a)

where the disclosure is required for the

detection, prevention or prosecution of criminal offences

under the criminal provisions of this Act or any other law;

(b)

where the information is disclosed with a view to

the institution of, or otherwise for the purposes of any

proceedings by the competent authority before any court under

this Act;

(c)

where the information is disclosed in civil or

commercial proceedings in relation to the bankruptcy or

dissolution and consequential winding up by the court of an

issuer or licence holder, provided such information does not

concern third parties and is necessary for the carrying out of

the proceedings, or is disclosed to an overseas body

responsible for the liquidation and bankruptcy of a person

holding a licence or an equivalent authorisation from a

European regulatory authority or an overseas regulatory

authority;

(d)

where a summary or collection of the

information is prepared or supplied in such a way as not to

enable the identity of any persons, to whom the information

relates to be ascertained;

(e)

where the information is disclosed to an auditor

where such disclosure would assist it in the exercise of his

functions under article 50;

(f)

where the information is provided to the Central

Bank of Malta in the exercise of its functions in terms of law;

(g)

where the information is provided to such other

local or European or overseas regulatory, judicial or

enforcement authorities in the pursuance of serious concerns

of a regulatory or criminal nature

Provided that the provisions of this article shall not

prevent the competent authority from exchanging or transmitting

confidential information belonging to issuers or licence holders to

ESAs or the ESRB

Provided further that the provisions of this article shall

not prevent the competent authority from using such information for

other purposes where the body or person communicating information

to the competent authority consents thereto.

(2) The provisions of this article shall not preclude the

competent authority from transmitting to the Central Bank of Malta,

the ESCB and the ECB, in their capacity as monetary authorities,

and, where appropriate, to recognised clearing houses or other similar

body performing clearing or settlement services, and to other public

authorities responsible for overseeing payment and settlement

systems, confidential information intended for the performance of

their functions. Likewise, the competent authority shall be entitled to

the receipt of such information as it may require for the purpose of

performing its functions under the Act.

(3) Where an officer or an employee of an issuer or licence

holder has reason to believe that a transaction or a proposed

transaction could involve money laundering or the funding of

terrorism, he shall act in compliance with the reporting and other

obligations set out in the regulations made under article 12 of the

Prevention of Money Laundering Act and any procedures and

guidance issued thereunder, and such disclosure shall not constitute a

breach of confidentiality.

PART X

Miscellaneous Provisions

Deleted by Act XI.2025.43.

A notice or other document to be given or served under

this Act, or any rules issued or regulations made thereunder, shall be

deemed to have been duly given or served on a person if -

(a)

it has been delivered to it; or

(b)

it has been left at the address furnished by it to

the competent authority, or to his last known address; or

(c)

if it has been sent to it by post or by telefax at

any of the aforesaid addresses; or

(d)

in the case of a body of persons, whether

corporate or unincorporate, if it has been given or served in

any of the manners aforesaid to or on a secretary, clerk,

manager or their equivalent, or to any member of the board of

administration or an appointed representative.

Where a licence holder wishes to carry on the respective

activities in a Member State or EEA State, in exercise of a European

right, such right shall be subject to -

(a)

a prior notification to the competent authority in

accordance with regulations made and rules issued under this

Act; and

(b)

the laws of that Member State or EEA State.

The competent authority shall cooperate with the ESAs

and other European, overseas and national regulatory authorities

whenever necessary and in accordance with any applicable European

or Maltese law or Malta’s international commitments, as the case

may be.

PART XI

Transitory Provisions

(1)

Any person who, on the date of the coming into

force of this Act -

(a)

is undertaking an activity in terms of article 3

shall, within three months from the date of coming into force

of this Act, draw up a whitepaper and register it with the

competent authority in terms of the said article

Provided that this paragraph shall be applicable

only to those persons who have commenced an offering or have

applied for admission to trading in terms of article 3 by not

earlier than two weeks prior to the coming into force of this Act;

(b)

is providing the services of a VFA agent within

the meaning found under this Act, shall, within one month

from the date of coming into force of this Act, apply to the

competent authority for registration in terms of article 7;

(c)

is providing a VFA service within the meaning

found under this Act shall, within twelve months from the date

of coming into force of this Act, apply to the competent

authority for licence in terms of article 14.

(2) A person under sub-article (1) may, subject to a prior

notification to the competent authority of the activity it is undertaking

and, or service or services it is providing, immediately upon the

coming into force of this Act, continue to undertake such activity or

provide such service or services in or from within Malta until the

whitepaper has been registered with, or the application has been

determined by, the competent authority and, in so doing, is not to be

regarded as carrying on such activity or providing such service in

contravention of this Act.

(1)

Any issuer who, as from the first date of coming into

force of the Virtual Financial Assets (Amendment) Act, 2024, shall

seek to register a whitepaper in accordance with article 3, shall deliver to

the competent authority an application for the registration of a

whitepaper, and the appointment and services of a VFA agent shall no

2024. longer be required.

(2)

Without prejudice to article 64(2), any person who, as from

the first date of coming into force of the Virtual Financial Assets

(Amendment) Act, 2024 shall seek to apply for a licence to provide a

VFA service in or from within Malta in accordance with article 14(1),

2024. shall submit an application to the competent authority, and such person

shall no longer be required to make the application through a VFA agent.

(3)

Notwithstanding the provisions of sub-articles (1) and (2),

where a VFA agent has submitted an application to the competent

authority for the registration of a whitepaper or for the issuance of a

licence prior to the first date of coming into force of the Virtual

Financial Assets (Amendment) Act, 2024 and such application has, by

such date, not yet been determined by the competent authority in terms

of articles 3(4) and 15(1), the VFA agent appointed to provide its

2024. services in relation to any such application shall be permitted to continue

to offer its services with respect to that application until the competent

authority issues a decision in relation thereto

Provided that the VFA agent shall, in any case, cease to offer

its services in relation to such application within three (3) months from

the first date of coming into force of the Virtual Financial Assets

(Amendment) Act, 2024 or until the competent authority issues a

decision in relation to the said application, whichever is the earlier.

2024. (4)

Without prejudice to the provisions of sub-article (3), VFA

agents shall cease to carry on the activities for which they are registered

with the competent authority upon the first date of coming into force of

the Virtual Financial Assets (Amendment) Act, 2024 and shall, within

three (3) months from the said date, submit to the competent authority

2024. the VFA Agent Deregistration Form provided for in the rules issued

under this Act.

(1)

When a person has submitted, through a VFA agent,

an application as referred to in article 14 prior to the first date of coming

into force of the Virtual Financial Assets (Amendment) Act, 2024 and

the competent authority has not yet determined, in terms of article 15,

whether to grant or refuse the licence being applied for by such date, the

2024. said person shall notify the competent authority, in writing, whether they

shall proceed with that application or whether they shall withdraw the

said application

Provided that, when such person does not notify the

competent authority in accordance with this sub-article within one (1)

month from the first date of coming into force of the Virtual Financial

2024. Assets (Amendment) Act, 2024, the competent authority shall deem the

application submitted by that person to have been withdrawn.

(2) Notwithstanding the provisions of this Act, and any

regulations made, and rules issued thereunder, applications as referred

to in article 14 may not be submitted to, and in any case shall not be

accepted by, the competent authority as from 1st August 2024.

(1)

Where a person has made, either directly or through a

VFA agent, a request to the competent authority to register a white

paper in accordance with article 3(4) prior to the first date of coming

into force of the Markets in Crypto-Assets Act and the competent

authority has not yet determined, in terms of the said article, whether

or not to register that white paper by such date, the said person

shall notify the competent authority in writing, whether it wishes to

proceed with its request for the registration of the white paper or

whether it wishes to withdraw the said request

Provided that, where such person does not notify the

competent authority, in accordance with this sub-article, within one (1)

month from the first date of coming into force of the Markets in

Crypto-Assets Act the competent authority shall deem the request

made by such person to have been withdrawn.

(2)

Notwithstanding the provisions of this Act, and any

regulations made, and rules issued thereunder, requests for the

registration of white papers in accordance with article 3(4) may not

be made to, and in any case shall not be accepted by the competent

authority as from 1 August 2024.

(3) Any whitepaper relating to an e-money token which is

registered by the competent authority under this Act shall be deemed

to have automatically been deregistered on 30 June 2024.

(4) Any whitepaper relating to a virtual financial asset other than

an e-money token or an asset- referenced token which is registered by

the competent authority under this Act shall automatically be

deregistered on 30 December 2024.

(5) The provisions of articles 3 to 13 shall cease to have effect as

from 30 December 2024.

(1)

Persons who, on 30 December 2024, are licensed

under this Act to provide, or hold themselves out as providing, one or

more VFA services may continue to provide, or hold themselves out as

providing, those services in accordance with the applicable

provisions of the said Act and any regulations made, and rules issued

thereunder, until 1 July 2026 or until they are granted or refused an

authorisation pursuant to Article 63 of the MiCA Regulation,

whichever comes first.

(2) Without prejudice to article 21, any licence granted to a

person under this Act shall automatically be cancelled on 2 July 2026

or upon the granting or refusal of an authorisation pursuant to

Article 63 of the MiCA Regulation to such person, whichever

comes first.